A new executive order will transfer billions from retirees to Wall Street.
One of the Donald Trump administration’s first orders of business on the economy will scuttle a rule protecting retirees from being scammed out of $17 billion a year by their own financial advisers.
The Obama administration approved the regulation last year. The rule established a “fiduciary duty” for money managers, requiring them to operate retirement accounts in the best interests of their clients. The Trump team’s repeal will allow financial professionals to steer retirees into expensive or poor-performing products that carry economic benefits and perks for the advisers and their firms, without disclosing such conflicts of interest.
The Obama administration calculated that consumers lose $17 billion a year due to conflicted investment advice. A Goldman Sachs study concluded the rule would cost the financial industry $13 billion in upfront costs and $7 billion each year.
White House National Economic Council Director Gary Cohn, who received $285 million from Goldman Sachs when he left the firm to work with Trump, announced the planned rollback in an interview with The Wall Street Journal.
“We think it is a bad rule. It is a bad rule for consumers,” Cohn said. “This is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”
Trump signed an executive order Friday afternoon directing the Department of Labor to overturn the rule, alongside another order designed to curtail elements of the 2010 Dodd-Frank Wall Street reform law. Dodd-Frank created a new Consumer Financial Protection Bureau, which has returned nearly $12 billion to wronged households since it’s founding.